Detailed plans to build the first "secure college" to rehabilitate young offenders through better education and training have been jointly announced by Nick Clegg and the justice secretary, Chris Grayling.

The fortified school, as it is described by the justice ministry, is to be built at a cost of £85m next door to the existing Glen Parva young offender institution in Leicestershire.

Work on building the East Midlands secure college will start next year with a 2017 opening date.

The facility is designed to pilot a network of secure colleges across England and Wales. It will house 320 young offenders in addition to the current provision of 1,778 beds in young offender institutions, privately-run secure training centres and local authority secure children's homes.

Clegg and Grayling said educational provision for the 800 under-18s currently held in young offender institutions will be more than doubled from the current 12 hours a week, under new contracts to come into effect from later this year.

Clegg said the number of young people in custody had been reduced – from 2,600 in March 2009 to 1,229 last November – but reoffending rates remained "sky high". The deputy prime minister said the answer lay in education.

He said: "We need to make sure that time spent in custody is time well spent. We need to turn these young people into better citizens not better criminals. If we want to stop prisons being colleges of crime, we have to teach these kids how to do something else." He said some young offenders spent less than one school day a week in the classroom.

Grayling said young offenders needed to be given the skills and self-discipline they need to gain employment or training on release.

The justice ministry says the pioneering fortified school will provide strong discipline while focusing on rehabilitation and education. It will have a headteacher or principal at the core of a leadership team made up of educational professionals and offender managers.

The secure college will cost £85m to build. There are no precise estimates of running costs but officials say it will be less than the current £100,000 a year per head cost of current youth custody provision.

Bids to run the college are to be invited from a range of providers including from the private and voluntary sectors.

The plan carries echoes of the original conception for the privately run secure training centres that were launched by Ken Clarke when he was home secretary in 1992. Whitehall sources say the eventual aim is to replace the network of troubled secure training centres with secure colleges.

Penelope Gibbs, chair of the Standing Committee for Youth Justice, said the single focus on education was misguided as there were many underlying causes of youth offending. "A more holistic therapeutic model is needed rather than a gimmicky repackaging of our current costly and broken approach to child custody," she said.

"Numbers of children in custody have been falling, and the government's focus should be on ensuring further reductions so that only those children who are a genuine danger are placed in custody. The few children who need to be imprisoned should be in secure children's homes local to them, not in a 320 capacity prison in the middle of the country."

The shadow justice secretary, Sadiq Khan, said building one new secure college would do little to reduce the reoffending rate across the rest of the country.

• This article was amended on 17 January 2014. An editing error led to the earlier version saying Penelope Gibbs was "chair of parliament's standing committee for youth justice". The Standing Committee for Youth Justice is not a parliamentary committee but a membership body; it describes itself as "an alliance of over 30 organisations working together to improve the youth justice system in England and Wales".